Featured StoryChina has been dominating the headlines in recent days... And not in a good way.
Since late last week, worries about slowing growth, financial-system shenanigans, and the potential for an "Asian Contagion" type spillover have whacked global stocks - and have left folks wondering if the Chinese Miracle is over.
But China's kind of like a still-young tech venture: There are going to be reversals, it's going to be volatile, and it's normal to expect this kind of whipsaw market action.
And let me tell you something else: While it's true that Beijing has some big problems to solve, investors who just write China off are going to miss out on one of the biggest profit opportunities in global technology.
Even as the broader economy there slows (meaning it's still growing - just at a slower rate than before), there's a tech-focused slice of that country's market that continues to advance at a scorching pace.
In fact, if you look at the numbers, I bet you'll agree with my assessment that we're looking at the hottest investable market on earth.
Today I'm going to tell you all about this market... and I'm going to show you exactly how to play this for maximum gain. Full Story
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Q&A With Keith: The Real Answers in China Are Never That Simple
As you might imagine, I get a lot of questions about China - it's topical and it's very important to our future.
Most are really just reincarnations of concerns voiced since 1970 when China first began to open up. In that sense, they're really nothing new.
So rather than tackling the same old "they'll never succeed because they're not democratic" or "ghost cities" arguments that seem to incessantly make the rounds, let's frame them in terms of what's in the news lately and dig into the subtleties that escape most Westerners.
And, let's start with one of the questions I get the most.
Q - Is China going to have a "hard" or "soft" landing?
A - This one stumps me. Where have the people asking this question been? China's had a soft landing for the last four years. They are already there - the economy is slowing, debt is rising, and the urban migration may be closer to an end than people think.
The fact is that nobody can define what a Chinese soft or hard landing actually is because Western metrics don't apply. It's just a catch phrase that gets bandied about in the media.
That's why I believe this question is really a matter of perspective. For example, there is no question China faces huge challenges, but those challenges are no different than many we've faced here in our own past.
During the last century we experienced two world wars, multiple recessions, a depression, and a presidential assassination -- and still the Dow rose more than 20,000%.
China will, too. The genie is not going back in the bottle.
As I recall, many people in England thought that America was a pretty silly venture at one time. And don't forget that the world thought Japan was good for nothing more than cheap tin toys following WWII.
Looking at China through Western lenses is a mistake.
Q - The Chinese copy everything. Companies can't make money there, especially lately.
A - That's simply not true. Domestic Chinese companies have made plenty of money. So have foreign companies like McDonalds, ABB, Coke, and even GM, which have been fabulously successful there because they've taken the time to localize their products.
Not many people know this, but the ultimate sign of executive status is a jet black Buick minivan in Beijing at the moment. How's that for a contradiction?!
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Money Morning Mailbag: Rising Global Energy Demand Is Providing Key Investor Opportunities
Energy companies reported robust third-quarter profits this week in another sign that rising global energy demand is something investors can't afford to ignore.
Exxon Mobil Corp. (NYSE: XOM) reported yesterday (Thursday) its third-quarter net income rose 55% from a year earlier to $7.35 billion, or $1.44 a share - the biggest jump in six years. Royal Dutch Shell PLC (NYSE ADR: RDS.A, RDS.B) reported its third-quarter profit rose 18% from the year before, noting it's in a "delivery window for new growth," and ConocoPhillips (NYSE: COP) said its third-quarter profit more than doubled.
"Global oil demand implications have continued to surprise to the upside," Barclays Plc (NYSE ADR: BCS) analysts wrote in an Oct. 20 note to clients.
Money Morning Chief Investment Strategist Keith Fitz-Gerald addressed the importance of energy industry investing earlier this week on a Fox Business Network appearance.
China Ousts U.S. as Most Attractive Market for Renewable Energy Investing
China for the first time has overtaken the United States as the most attractive country for renewable energy investment, according to a quarterly index ranking released yesterday (Wednesday) by accounting firm Ernst & Young.
As the world's biggest energy consumer, China set a goal to generate 15% of its electricity from renewable sources by 2020 - up from 9% in 2008 - and has been encouraging investment in its clean energy companies to make its target.
"China has all the benefits of capital, government will, and it's a massive market," Ben Warren, Ernst & Young's environment and energy infrastructure leader, told Bloomberg. "We would expect to see China retaining a dominant position."
Fighting to Feed the Dragon: McDonald's Vs. Yum!
Speed kills. And in the fast food industry, it's imperative.
The speed of service and the ability to quickly adapt menus, packaging and advertising are what makes a market leader. And right now, the speed at which fast food companies make the transition into foreign markets, particularly China, is what matters most of all.
The industry's two biggest players, McDonald's Corp. (NYSE: MCD) and Yum! Brands Inc. (NYSE: YUM) - the parent company of KFC, Pizza Hut, and Taco Bell - know that.
Chinese Real Estate: Four Ways to Profit From the Biggest Urban Migration in History
SHANGHAI, The People's Republic of China - Given what you may have heard about Chinese property values in recent months, it may surprise you to learn that Chinese real estate investors are extremely value oriented.
And so are the institutional investors I've run into during my latest investment-research visit to this country. These institutional players want to lock up some valuable land parcels before 2020. That's the date by which 500 million Chinese citizens are expected to have moved into China's cities as part of the greatest urban migration ever recorded.
You can do the math: We're talking about a group that's 1.6 times the entire U.S. population ... moving from China's countryside to its cities in the next 10 years.
To discover four ways to profit from this massive migration, read on...
Pacifying the Panda: U.S. Companies Must Take a New Approach to China
There's no question about what kind of profit opportunities the Chinese market offers. Moreover, the willingness of U.S. companies to partner with China in the pursuit of profit is equally blatant.
So why is it that more U.S. businesses feel less welcome in China now than they did four years ago?
The fact is that in the past four years, China's economy has continued to grow by leaps and bounds, while a humiliating financial collapse and soaring debt have tarnished much of the shine that once adorned the U.S. market.
Indeed, for the first time in perhaps more than a century China has the upper hand. How long that will last is a difficult question to answer, but right now, China wants to use its leverage to support domestic companies - and it's doing so unapologetically.
Goldman Backs Money Morning Prediction That China's Yuan Will Dethrone the Dollar
Back in May, just after he'd completed his latest investing tour of China, Money Morning Chief Investment Strategist Keith Fitz-Gerald made a bold prediction: China's currency, the yuan, is destined to dethrone the U.S. dollar as the world's chief reserve currency.
Earlier this week, Fitz-Gerald's prediction acquired a powerful new disciple: Goldman Sachs Group Inc. (NYSE: GS) Chief Economist Jim O'Neill.
In an essay that's part of a report published Friday for Chatham House, a London-based foreign-affairs researcher, O'Neill wrote that China's yuan is destined to become a global reserve currency on par with the U.S. dollar or European euro.
U.S. China Currency Dispute Heating Up
The heated debate between China and the United States over the value of its currency intensified yesterday (Thursday) when a senior Chinese trade official warned that further appreciation of the yuan could put many of its exporters out of business - something China can't afford.
Those remarks came shortly after a key International Monetary Fund (IMF) official flatly stated that the currency is severely undervalued.
China's Vice Commerce Minister Zhong Shan told The Wall Street Journal in an exclusive interview that the profit margins on many Chinese export goods were less than 2% and any further increase in the currency's value would endanger more exporters' survival.
China's Exports Surged by 46% in February, Adding to Currency Pressures
China exports in February rose for the third month in a row, beating forecasts and putting added pressure on government officials to rein in stimulus spending and loosen currency policies.
Exports in February jumped 45.6% from a year earlier after a 21% advance in January, the customs bureau reported today (Wednesday) on its Web site.
Seasonally adjusted imports in February rose 6.3% from the previous month, reversing January's 0.9% drop and narrowing the Red Dragon's trade surplus, indicating domestic demand remains strong despite government efforts to slow lending.
Analysts say the February data is hard to interpret since... Full Story
China Standing Firm on Currency Policy Despite Mounting Pressure
China's rigid stance to not appreciate its currency continues to cause problems with "hot money" and foreign trade relations.
A report from Yi Gang, China's director of the State Administration of Foreign Exchange (SAFE), today (Tuesday) shrugged off calls for currency appreciation. Yi said China's foreign-exchange reserves - which are the largest in the world at $2.4 trillion - are safe and stable, and the country will strengthen its supervision of speculative cash inflows.
Speculation that China's currency, the yuan, is soon to rise has increased investment, but such speculation is not particularly welcome. "Underground money shops" disguise funds as foreign direct investments and trade accounts in an attempt to profit from the increasing spread on interest and exchange rates, according to Yi.
The Chinese Are Selling Treasuries – So What Are They Buying?
In the monthly U.S. Treasury report this week, it was announced that China had sold $34.2 billion of Treasuries in December (or allowed short-term ones to run off), making Japan once again the largest holder of U.S. Treasuries.
The battle between China and Japan for the title of largest holder of this dubious asset is not very interesting. What's more interesting is the question of where China is instead opting to invest. After all, $34.2 billion is a fair chunk of change, and China's overall reserves are growing - not shrinking - and now total $2.4 trillion.
The People's Bank of China usually keeps its holdings a carefully guarded secret, much more so than for most central banks - our knowledge of its holdings of Treasuries comes from U.S. data, not from China. We do, however, have some evidence about the Chinese government's investment thinking, thanks to the holdings of China Investment Corp., the country's $200 billion sovereign wealth fund.
To discover the details of China’s global investments, please read on... Read More...
Europe-China Connection Could Rattle Stocks
I was watching the Asia Edge show on Bloomberg television Wednesday night when the lovely and smart Susan Li broke in breathlessly on her guest with news about China's consumer inflation numbers. Inflation was reported up just a touch in January, which was considered good news because if it was higher it would have made Chinese banking authorities more anxious to clamp down on interest rates and if it was lower it would have raised the awful specter of deflation.
The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.
Read more about the Europe-China connection... Read More...
How to Profit From China's Next Move
For many investors who don't have the benefit of 20 years of experience in Asia like I do, figuring out what Beijing is up to is both puzzling and difficult.
But a handy little tool called a "Form 13F" can help.
In case you're not familiar with it, the 13F is a disclosure document that the U.S. Securities and Exchange Commission (SEC) requires institutional-investment managers to file when they hold $100 million or more of certain U.S.-listed stocks.
China's $300 billion sovereign wealth fund (SWF) - the China Investment Corp. (CIC) - just filed its first-ever 13F with the SEC, revealing that it purchased about $9.6 billion worth of U.S. stocks last year.
And it confirms much of what we've been telling you since the global financial crisis began - namely that China would take advantage of the crisis by purchasing beaten-down stocks, resources, and hard assets ... and in a big way.
Even more important, this filing hints at what China is likely to do next - an insight that will help investors figure out where to put their money in order to maximize their personal profits.
To discover how to profit from China's next move, read on... Read More...